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2. OBLIGATION TO ENSURE THAT ALL CLIENTS DOWN THE CHAIN ARE ELIGIBLE TO APPLY FOR ADMISSION TO BID DIRECTLY IN THE AUCTION
This requirement has its legal base in Article 18(4). This provision states that where financials bid on behalf of their clients, they are required to ensure that those clients are themselves eligible to apply for admission to bid directly pursuant to the Auctioning Regulation. Where the clients of the persons referred to above are themselves bidding on behalf of their own clients, they shall ensure that those clients are also eligible to apply for admission to bid directly. The same shall apply to all further clients down the chain bidding indirectly in the auctions.
In this place it is necessary to refer to the general requirements for eligibility to apply for admission to bid directly. They are set out in Articles 19(1) and (2). It could be in brief generalised that members or participants of the secondary market organised by an auction platform that are eligible persons pursuant to Article 18(1) or (2) (click here to see this Article) will be admitted to bid directly in the auctions conducted by that auction platform without any further admission requirements.
The persons, who are not members or participants of the secondary market organised by an auction platform, however, must:
(a) be established in the Union, an operator or an aircraft operator;
(b) hold a nominated holding account;
(c) hold a nominated bank account;
(d) appoint at least one bidder’s representative;
(e) satisfy the auction platform concerned in line with applicable customer due diligence measures as to their identity, the identity of their beneficial owners, integrity, business and trading profile having regard to the means of establishing the relationship with the bidder, the type of bidder, the nature of the auctioned product, the size of prospective bids, and the means of payment and delivery;
(f) satisfy the auction platform concerned of their financial standing, in particular, that they are able to meet their financial commitments and current liabilities as they fall due;
(g) have in place or are able to put in place when requested, the internal processes, procedures and contractual agreements necessary to give effect to a maximum bid-size imposed pursuant to the Auctioning Regulation;
(h) give collateral in accordance with the Auctioning Regulation.
From the above provisions follows a conclusion that financials intermediating in the auctions of emission allowances of the third trading period will have to check whether their client meets the above points. The appropriate stipulations in agreements with clients providing for further examinations down the clients chain will also be necessary.